Interesting email I recieved today......

[Mike Henderson]

That's easy to write into law- spend "X" amount on R&D and you get "X" amount of a break.

That's been tried but money is fungible. Let's say that a company is going to spend $1M on R&D. So they repatriate $1M of their foreign profits and tell the government "Look, I took $1M home and I spent $1M on R&D so no tax". The problem is that they would have spent $1M anyway.

Things have been tried to get around that. For example, only an increase in R&D spending will qualify for the tax break. But the company was planning to increase their R&D spending anyway, so now their increase is tax free. It's extremely difficult to craft a law that will achieve it's real goals.

It's true that many people hold shares in corporations but if you look at the statistics of ownership, the wealthy people in this country own the majority of the wealth, which means shares of the corporations. So when you give a benefit to "shareholders" you're mostly helping the wealthy increase their wealth. Certainly, if that's your goal, those are the policies you should support.

Fair is a complex question. Corporations are people in the eyes of the law. As a matter of policy, I believe all people should be taxed in a fair manner. Different people will have different ideas about what's fair - but as long as the goal is "fairness" I think we'll come to some acceptable compromises.

Mike

[Mike Henderson]

The US seems to think that it is the business mans responsibility to take care of the health care aspect of the population. I don't see why businesses should be responsible for it. If they want to provide it it is a nice perk. But to have it mandated that you provide it for your employees is just something that will drive the business to countries where this isn't required.

If the people want healthcare provided to them they should be taxed as an individual to have the service. I see no reason why a business should be responsible for the health of their employees. It is beneficial to have a healthy workforce, but the individual should be responsible enough to take care of their own care.

Ah, if it were only so simple. There are lots of people who are so poor that they cannot pay for health insurance. People who lost their jobs and their health insurance are a good example. When you have no income, how are you to buy health insurance?

Mike

[Sal Kurban]

I think we are drifting from the original discussion. Let me state couple of facts. More than 70 percent of all costs are labor costs in the overall economy (that is also the share of labor compensation in US national income). So that is going to weigh more heavily than any other factor. In traditional manufacturing, where production technology is common knowledge, is there any way the US can compete? Answer is no because China and other countries have cheaper labor. The US can focus on sectors where technology is not common knowledge. There is a consensus in economics that protectionism or industrial policy is not the answer. The simple fact is specialization and exchange make everyone better off and that is why even at the individual level we specialize and engage in exchange.

What we should also blame is the current international monetary system which leads to excessive "global imbalances" (some countries are chronic net borrowers like the USA and some countries are net lenders, like Germany, Japan, China, oil exporters). In the US, the corporate sector, households, and government play a role in the indebtedness. We just spend like there is no tomorrow. When spending exceeds income, we run trade deficits, and borrow the difference. The US national saving rate is near 10 percent and in China it is in excess of 50 percent. The US is in a unique position because US currency is used as an international reserve which allows the US to just issue debt at near zero interest rates and print money to finance the deficit. That is another source of complacency. Someone is willing to lend you at zero percent, and should not you accept?

Why anyone would lend at zero? Because of the safety of US assets and because of the key position of the US dollar as a reserve currency. Another factor is that China and other emerging markets feel safer when they sit on a stash of US assets mainly treasuries. That is because they use these reserves as an insurance policy against financial crises of the likes we have seen in 1997 in the Asian meltdown. If you sit on trillion dollar reserves, no capital flight can shake you. You see the current system has created a dependency and all parties have something at stake. Unless we switch to a multipolar world and/or other reserve currencies emerge, the current system is here to stay. China will artificially keep its currency undervalued so as to export more and we are willing to export our treasuries which have virtually no yield. This also keeps US interest rates at historically low levels which feeds spending binges and so on...

[Leo Graywacz]

Ah, if it were only so simple. There are lots of people who are so poor that they cannot pay for health insurance. People who lost their jobs and their health insurance are a good example. When you have no income, how are you to buy health insurance?

Mike

Tax the people directly, don't go through the businesses. There are already a lot (near 46%) of people who already don't pay federal income taxes that still receive the benefits of the taxes paid by others. What makes you think that all businesses can afford to have medical benefits for their employees? Anything beyond a paycheck is a perk as far as I am concerned. If you accept a job that has no benefits then that is what you get. If you couldn't or didn't get an education that can get you a job that does have these perks or don't have the skills that may get you into a field that has perks then you probably don't deserve perks. Ya, cruel.

[Mike Henderson]

Mike,

Has it ever occured to you that a lot of middle class people are shareholders?

And....the statement that only the middle class that pay taxes. Absolutely absurd statement that can't be factually backed up. Period. Certainly shows a political bias however.

I think I answered the question about middle class people being stockholders.

Regarding your other point - you're correct that I should have worded that differently. But let me use that as a springboard to discuss some philosophy.

When I look at certain countries that I've been to, I've seen societies without much of a middle class. There are lots of poor people and a few wealthy people who own most of the wealth of the country and control the government. Often this leads to societal unrest (including revolution) when the people rise up to demand opportunity. Of course, usually this just changes the people at the top and things go back to the way they were.

I would like to see the United States adopt policies that encourage the growth of the middle class, because a thriving middle class brings lower crime and stability to a country. Policies that allow people who were not born to wealth to be able to get a good education, to get jobs (to not be discriminated against) and to be able to start a business without an establish large business doing things to destroy the upstart. For this last thing, if you remember Standard Oil, before there were laws against it, Standard Oil would go into an area and drop the prices below cost because they could support doing that. Once they drove all the small oil companies out of business, they would raise prices significantly above market because there was no competition. I'd like to see small business protected from the modern equivalent of the Standard Oil technique.

So that's why I'm an advocate for the middle class. I believe that a thriving middle class is key to the future of our country.

Mike

[Mike Henderson]

Tax the people directly, don't go through the businesses. There are already a lot (near 46%) of people who already don't pay federal income taxes that still receive the benefits of the taxes paid by others. What makes you think that all businesses can afford to have medical benefits for their employees? Anything beyond a paycheck is a perk as far as I am concerned. If you accept a job that has no benefits then that is what you get. If you couldn't or didn't get an education that can get you a job that does have these perks or don't have the skills that may get you into a field that has perks then you probably don't deserve perks. Ya, cruel.

There's not much difference between our positions. But let me address your "cruel" comment first. It's very difficult to turn your back on a person who was in an automobile accident and is bleeding to death simply because they don't have health insurance. Or to turn our backs on children who were born to poor parents and are now sick. So we provide health care for those people. That health care is paid for by taxes or indirectly by health insurance premiums that are higher because hospitals have to charge the paying people more to cover the cost of providing care to the poor.

I agree with you that we should stop this charade. You suggested doing it by taxing people directly and I'm okay with that.

Mike

[John Fabre]

When you have no income, how are you to buy health insurance?

Mike

Medicaid with welfare

[David Larsen]

50 years ago our fathers and grandfathers knew how to build a house. With that I mean each and every step from the ground up. Today there are framers that don't know the first thing about finish work, etc. We as a society have evolved. We specialize! We do more of the same things over and over and become more efficient. I think there is a piece of the pie for everyone. It just so happens that China has a manufacturing piece of the pie at the moment. We are good at other things.

[Mike Henderson]

Medicaid with welfare

Yep, that's exactly right. And we pay for that through taxes. Of course, there are people who are really trying, working long and hard, and make just a bit more the cutoff amount, but still can't afford health insurance. So the very poor are taken care of and the wealthy take care of themselves, but the people in the (lower) middle are left out. So if their child gets seriously ill, the logical and reasonable thing for them to do is quit working.

Mike

[Scott Shepherd]

You can call them wealthy people and want to take their money from them. I prefer to call them "the people 95% of the rest of the people work for". I'm a job creator. I hire people and I pay people wages, all of which taxes are taken out of. If you raise my taxes as one that creates jobs, guess what I'm going to do. Not hire people, cut my expenses or do whatever else I have to in order to make my business survive.

I have yet to see one factual statistic that show that raising taxes encourages people with money to hire, to give their employees more, or to invest in new machinery, people, or technology.

I've not seen any evidence in that ever being the factual case. However, there is plenty of factual data that shows when you cut taxes, it spurs that sort of spending. History is there for that.

Like I said, I'm running a business. If you make it harder on me, why in the world would you think I'd take the risk to hire anyone or pay anything for them. So by raising my taxes, you're making sure I don't hire people, I don't invest, and you get no taxes from all the employees I'd hire, no sales tax from all the things I'd buy and use to run my business.

I've spent my time outside the USA as well and I don't see many social models out there that are fairing better than we are.

The issue I see is just because I think we should encourage businesses to grow and hire people, doesn't mean I think we should ignore those that need help. It's not an "either, or" situation. Last time I checked, Bill and Melinda Gates have invested more money to help people's health than just about anyone else on the planet. They weren't taxed into doing that. They did it because they were fortunate and believed that they could help people.

[Mike Henderson]

The issue I see is just because I think we should encourage businesses to grow and hire people, doesn't mean I think we should ignore those that need help. It's not an "either, or" situation. Last time I checked, Bill and Melinda Gates have invested more money to help people's health than just about anyone else on the planet. They weren't taxed into doing that. They did it because they were fortunate and believed that they could help people.

If everyone would voluntarily contribute some of their money to help less fortunate people in this country, we wouldn't need taxes. But, of course, that won't work. Gates, and Buffet, are extraordinary exceptions but even if they gave their whole fortunes to help education (for example) it would be a drop in the bucket and would probably last only a couple of years. Then we'd be back to where we are now.

I'll quote Russel Long - "Don't tax you, don't tax me, tax that fellow behind the tree." If you don't tax me, I'll be able to grow my wealth more quickly and I promise to use it to help people before I die. But you and I both receive benefits from this country and we both should help pay the costs.

Mike

[Greg Peterson]

I'm a job creator. I hire people and I pay people wages, all of which taxes are taken out of. If you raise my taxes as one that creates jobs, guess what I'm going to do. Not hire people, cut my expenses or do whatever else I have to in order to make my business survive.

You succinctly describe the widely accepted paradigm. Business owners are the job creators and if you don't reduce the job creators tax burden (even though it is at a fifty year low), they will take their ball and go home. Game over. We've swallowed this pablum for so long now we've forgotten the most basic concept of business.

Consumers are the job creators. Without consumer demand for a goods or service, there is no business. No one ever hired a worker simply because of some short term tax incentive. At least no successful business. Conversely, show me one business that did not engage in a sensible commerce activity or investment because of the tax rate on the potential gain.

A strong, thriving consumer class raises all boats. By now it should be obvious that the supply side model at best did not work as advertised and at worst was a fraud.

Left to the whims of economic anarchy, 99% of us would be living in abject poverty, the likes as seen in third world nations. The middle class would not exist were it not for some basic ground rules.

[Leo Graywacz]

Only problem is right now the consumers have run out of money and credit because a lot of people have lost their jobs. So now we have to start the engine up again and the only way to get things started are to have the job providers start hiring so the consumers can once again buy things. There are a lot of jobs that don't require the sale of an object. Service jobs and infrastructure jobs to name a few.

[Greg Peterson]

The AJA is comprised in large part, as was the stimulus previously, of payroll tax cuts. Put money into a middle class family's pocket and that money gets recirculated instantly. It was argued that the stimulus plan was far too small to get consumer spending to the level where business would have to hire workers to meet demand. In retrospect, I think those claiming the stimulus was too small were correct.

The US has one of the highest corporate tax rates in the world. But the effective tax rate that is actually paid is well into single digits. This notion that corporations are persons is a stretch. They exist to fill a consumer demand. Why should they be given the high ground as some kind of super citizen when they are nothing more than a legal entity? The largest, wealthiest, multinational corporations have unequal access and thus representation. Small business is the engine that drives our economy and should be afforded the same attention as BP, IBM or DuPont.

How we got to this juncture is at once complicated and not complicated. Suffice it to say though that we are in a pickle and doubling down on the past thirty or forty years of policy seems to me the very definition of insanity.

[John Fabre]

Yep, that's exactly right. And we pay for that through taxes. Of course, there are people who are really trying, working long and hard, and make just a bit more the cutoff amount, but still can't afford health insurance. So the very poor are taken care of and the wealthy take care of themselves, but the people in the (lower) middle are left out. So if their child gets seriously ill, the logical and reasonable thing for them to do is quit working.

Mike

With the job market the way it is, more and more kids nowadays consider welfare a way of life.